Former Prime Minister Liz Truss has urged Rishi Sunak to cut taxes, while defending her economic policies and emphasising the need for further tax reforms to foster a business-friendly environment and enhance the UK's appeal to investors.
One year on from her ‘mini-budget,’ during her short tenure as prime minister, Ms. Truss claimed that she had been hampered at the time by a "powerful force comprising the economic and political elite, corporatists, parts of the media and even a section of the Conservative parliamentary party."
She also admitted that there had been room for improvement in communication and refining her operation while in Number 10.
Speaking in a wide-ranging keynote address to the Institute for Government, Ms. Truss outlined several key measures as part of her strategy, including reforming the tax system, and a return to VAT-free shopping for foreign visitors, with the goal of enhancing the attractiveness of UK cities as tourist destinations.
Ms. Truss argued for initiating tax system reforms aimed at making the UK more attractive for business investments. Her proposed changes included reversing the impending hike in corporation tax and reducing the top rate of income tax.
The intention behind these moves, she claimed, would be to signal the UK's openness to attracting talent and capital.
She advocated for the reform of IR35 legislation, which is intended to reduce administrative burdens on small businesses, streamlining their operations and making them more efficient.
Measures Are Not 'Unfunded Tax Cuts'Ms. Truss firmly rejected the characterization of these measures as "unfunded tax cuts," asserting that independent calculations conducted by the Centre for Economics and Business Research (CEBR) contradicted this characterization.
According to the CEBR's analysis, implementing these tax cuts could potentially lead to increased revenues for the government within a five-year timeframe.
Furthermore, Truss disputed the cost estimates presented by the Treasury and the Office for Budget Responsibility (OBR) regarding the freeze on corporation tax.
She cited the CEBR's findings that the cost of this measure was significantly lower than the figures provided by the Treasury.
LDAccording to the CEBR, the cost of freezing corporation tax over five years amounted to £25 billion, as opposed to the Treasury's estimate of £45 billion.
Ms. Truss criticised the OBR for relying on static economic models that, in her view, failed to acknowledge the potential revenue-enhancing effects of these tax policies.
Rupert Harrison, former chief of staff to George Osborne, took to X (formerly Twitter) to find fault with Ms. Truss’s calculations, saying: “Even on its own terms this still leaves £25 billion of permanent additional borrowing at a time when the main issue was inflation.
Issues Within the NHSAlso taking the opportunity to acknowledge serious issues within the NHS, Ms. Truss advocated for decentralisation and empowering local entities. She argued that the NHS's problems were not primarily due to a lack of funding.
Calling for greater freedom in markets, the former Prime Minister spoke of a “growing burden” in regulation, and highlighted the cost of new regulations in 2022 as £10 billion, according to government figures.
She stated that this figure may be an “underestimate.”
Ms. Truss bemoaned the increase in government spending since the last time a Labour government took charge, saying, “No other European country has seen this level of growth in state spending, apart from Greece and Spain.”
Clarifying that the Office for Budget Responsibility (OBR) was not consulted on her mini-budget plans, Ms. Truss explained that the OBR was not asked to provide input on Covid spending decisions, including the furlough scheme.
Ms. Truss justified the omission by asserting that increased spending was deemed necessary, and there was no immediate need for an OBR forecast.
She claimed that before assuming power, she had not realised the extent of the power bodies like the OBR wield, claiming that her u-turn on corporation tax was down to its influence.
Labour Ask PM to Block Honours ListAhead of her speech, Jonathan Ashworth, the shadow Cabinet Office minister, told Sky News this morning that he hoped Mr. Sunak would “block” Liz Truss’s resignation honours list.
Mr. Ashworth said: “If Rishi Sunak had any backbone, he would block this Liz Truss list today, because I don’t think businesses, hardworking families paying so much more on their mortgage think that list should go ahead. In many ways, it’s a kick in the teeth."
Arguing that there is now less competition and more government involvement in key sectors, than there was 25 years ago, Ms. Truss pointed to government ownership of a 40 percent stake in Natwest, as an example of perceived state control.
She highlighted that the cost of energy in Britain is currently “twice” what it is in the United States.
Ms. Truss also responded to criticism from the former governor of the Bank of England (BoE), Mark Carney, who characterised her policies as "Argentina on the Channel."
She argued that figures like Mr. Carney and central bankers failed to acknowledge their role in allowing excessive government borrowing and contributing to prolonged low economic growth.
'Institutional Bureaucracy'Praising civil servants for their work, she also criticised "institutional bureaucracy" hindering politicians from implementing reforms, using her unsuccessful attempt to challenge Treasury orthodoxy during the Tory leadership campaign as an example.
Ms. Truss acknowledged criticism from international economic bodies but defended her choice to challenge economic orthodoxy rather than accept it.
Brushing off speculation on whether or not she planned a return to frontline politics, she took the opportunity to mention her forthcoming book, set for an April release, which would delve into her perspective on implementing a smaller state and tax cuts.